Correlation Between Cisco Systems and Alibaba Group

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Can any of the company-specific risk be diversified away by investing in both Cisco Systems and Alibaba Group at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cisco Systems and Alibaba Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cisco Systems and Alibaba Group Holding, you can compare the effects of market volatilities on Cisco Systems and Alibaba Group and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cisco Systems with a short position of Alibaba Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cisco Systems and Alibaba Group.

Diversification Opportunities for Cisco Systems and Alibaba Group

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Cisco and Alibaba is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cisco Systems and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding and Cisco Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cisco Systems are associated (or correlated) with Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Cisco Systems i.e., Cisco Systems and Alibaba Group go up and down completely randomly.

Pair Corralation between Cisco Systems and Alibaba Group

Given the investment horizon of 90 days Cisco Systems is expected to generate 0.41 times more return on investment than Alibaba Group. However, Cisco Systems is 2.47 times less risky than Alibaba Group. It trades about 0.0 of its potential returns per unit of risk. Alibaba Group Holding is currently generating about -0.05 per unit of risk. If you would invest  4,325  in Cisco Systems on June 26, 2022 and sell it today you would lose (259.00)  from holding Cisco Systems or give up 5.99% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Cisco Systems  vs.  Alibaba Group Holding

 Performance (%) 
       Timeline  
Cisco Systems 
Cisco Performance
0 of 100
Over the last 90 days Cisco Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Cisco Systems is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Cisco Price Channel

Alibaba Group Holding 
Alibaba Performance
0 of 100
Over the last 90 days Alibaba Group Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in October 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Alibaba Price Channel

Cisco Systems and Alibaba Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cisco Systems and Alibaba Group

The main advantage of trading using opposite Cisco Systems and Alibaba Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cisco Systems position performs unexpectedly, Alibaba Group can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alibaba Group will offset losses from the drop in Alibaba Group's long position.
Cisco Systems vs. Industrias Bachoco SA
The idea behind Cisco Systems and Alibaba Group Holding pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
Alibaba Group vs. BUSHVELD MINERALS LTD
Check out your portfolio center. Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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